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What's in Store for CSX Q3 Earnings Amid Coronavirus Woes?

CSX Corporation CSX is scheduled to report third-quarter 2020 results on Oct 21, after market close.

The Zacks Consensus Estimate for third-quarter earnings has been revised 2.2% upward to 92 cents per share in the past 60 days. Moreover, it has an impressive earnings history, having outperformed estimates in three of the preceding four quarters (missing the same in one). It has a trailing four-quarter positive earnings surprise of 3.7%, on average.

Against this backdrop, let’s discuss the factors that might have impacted CSX’s September-quarter performance.

CSX Corporation Price and EPS Surprise

CSX Corporation Price and EPS Surprise

CSX Corporation price-eps-surprise | CSX Corporation Quote

Factors Likely at Play

We expect CSX’s overall volumes for the to-be-reported quarter to have increased sequentially owing to gradual recovery from coronavirus woes. The Zacks Consensus Estimate for total volumes suggests a 19.4% gain sequentially.

Intermodal volumes are also likely to have aided third-quarter performance owing to reopening of operations after the second quarter. The Zacks Consensus Estimate for intermodal volumes indicates a 22% increase from the June-end reported figure. Notably, Zacks Consensus Estimate for intermodal revenue also inched up 25.9% sequentially.

Coal volumes are expected to have been aided in the third quarter by the gradual increase in export and domestic coal demand. Further, increased coal volumes are likely to have aided coal revenues in the to-be-reported quarter. The consensus mark for coal revenues suggests 10.8% rise from the number reported in second-quarter 2020.

Improved operational efficiency, courtesy of the precision scheduled railroading model, is expected to have contributed to the company’s bottom line in the quarter to be reported. The railroad operator’s operating ratio (operating expenses as a percentage of revenues) is likely to have improved in the quarter to be reported owing to cost-controlling initiatives. Notably, lower the value of this metric, the better.

Despite coronavirus concerns, CSX does not intend to cut back much on capital expenses. This might have hurt its bottom-line performance.

Earnings Whispers

The proven Zacks model predicts an earnings beat for CSX this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive earnings surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: CSX has an Earnings ESP of 0.62% as the Most Accurate Estimate is pegged at 93 cents, higher than the Zacks Consensus Estimate of 92 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CSX carries a Zacks Rank #3.

Highlights of Q2 Earnings

CSX’s earnings of 65 cents per share missed the Zacks Consensus Estimate of 67 cents. Moreover, the bottom line plunged 39.8% year over year due to drop in revenues. Total revenues of $2,255 million also lagged the Zacks Consensus Estimate of $2,306 million and declined 26.3% year over year owing to coronavirus-led volume declines.

Other Stocks to Consider

Investors interested in the broader Transportation sector may consider Union Pacific Corporation UNP, Kansas City Southern KSU and Norfolk Southern Corporation NSC as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

Union Pacific has an Earnings ESP of +0.53% and is Zacks #3 Ranked, presently. The company will release third-quarter 2020 results on Oct 22.

Kansas City Southern has an Earnings ESP of +0.50% and a Zacks Rank of 3 at present. The company will release third-quarter 2020 results on Oct 16.

Norfolk Southern has an Earnings ESP of +0.52% and is currently a Zacks #3 Ranked player. The company will release third-quarter 2020 results on Oct 28.

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Union Pacific Corporation (UNP): Free Stock Analysis Report
 
Kansas City Southern (KSU): Free Stock Analysis Report
 
CSX Corporation (CSX): Free Stock Analysis Report
 
Norfolk Southern Corporation (NSC): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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